A new study has found that only a minority of contracting professionals currently working off-payroll in the public sector are prepared to stay put if they are forced to pay the same tax as salaried personnel under new IR35 rules.
The study, conducted by contractor tax advisors Qdos Contractor, revealed that new IR35 reforms, which are just three weeks away, may trigger a mass exodus of IT contractors from the public sector.
Qdos Contractor polled 2,000 off-payroll professionals currently contracting in public sector bodies (PSBs). Many are ready to leave if they have to pay the same tax as permanent employees, and this will bring about immense consequences for a wide array of Whitehall-backed IT projects, Computer Weekly recently reported.
If the PSBs that these contractors currently work for decide that they are “inside IR35” when the new rules come into effect on 6th April, then 85 per cent will no longer work for the public sector, according to the study. The redesignation will give them the same income tax and NIC obligations as salaried workers while granting them none of the statutory rights and benefits that the latter enjoy.
Computer Weekly reported in October last year that the planned changes had already triggered major walkouts of IT contractors at a Ministry of Defence agency, suggesting that the intentions uncovered by the Qdos poll are far from empty threats.
Qdos Contractor’s CEO, Seb Maley, warned that the reforms could have serious knock-on effects for the entire public sector if, as the poll suggests, they result in major staff shortages.
He continued: “Whether it’s the NHS, HS2 or Government departments for that matter, it’s fair to say that every public sector body or project will be worse off should there be a walkout.
“The threat [is] not just to the public sector but [also] UK contractors and agencies, which makes it all the more important that well-educated, expert decisions are made when it comes to setting IR35 status.”
Mr Maley also noted that HMRC has only just released its online Employment Status Service despite the fact that the changes are only weeks away. He concluded: “Questions remain over its effectiveness and accuracy, and, put simply, people are still wondering what to do.”
Contractor Calculator CEO Dave Chaplin has advised PSBs to temporarily transfer all their contracting professionals into PAYE Umbrella Companies to allow sufficient time to determine their IR35 status properly.
Those subsequently deemed to be inside IR35 will then have the option of retaining their flexibility as contractors by remaining with the Umbrella, whereupon they will receive the same statutory rights and benefits as salaried staff while having their financial affairs managed centrally.